LSE Secures EU Approval for $27 Billion Refinitiv Deal

(Bloomberg) -- London Stock Exchange Group Plc’s $27 billion purchase of Refinitiv gained approval from European Union regulators, clearing the last major hurdle to the creation of a financial data powerhouse.

The LSE made “commitments that will ensure that the markets will remain open and competitive and the acquisition will not lead to higher prices or less choice and innovation,” the European Commission said Wednesday.

Obtaining EU approval clinches a transformational deal for the 300-year-old London bourse, giving it global scale as firms vie to meet surging demand for data and analytics in increasingly computerized financial markets. The news is also a boost for one of London’s flagship financial companies as the post-Brexit era disrupts the sector’s role on the world stage.

In a statement, LSE said the transaction still needed a “small number” of regulatory approvals and would be completed in the first quarter of this year. Its shares rose 1.9% at 1:20 p.m. in London.

Divestitures

LSE will sell Borsa Italiana, including its European government bond trading platform MTS, to Euronext NV and two Italian banks. The EU said this removes the overlap with Refinitiv’s activities in electronic bond trading.

LSE has also pledged to continue offering over-the-counter interest-rate derivative clearing services by LCH Swapclear on an open access basis for 10 years. This will hold it to EU regulations on non-discriminatory and transparent clearing despite the U.K.’s move to quit the EU.

The company promises not to discriminate between Tradeweb and other trading venues and middleware providers. It will also provide access to LSE venue data, FTSE UK Equity Indices and WM/R FX Benchmarks to all existing and future downstream competitors.

It committed not to degrade the technology and to maintain an information barrier between LSE customers and some Refinitiv busineses to avoid a negative impact on other vendors. These pledges also last for 10 years.

The post-merger company will combine LSE’s stock, debt and swaps trading and derivative clearing with data and indexing businesses that will compete with firms ranging from MSCI Inc. to Bloomberg LP. The parent company of Bloomberg News competes with Refinitiv to provide financial news, data and information.

Consolidation

The transaction also helped spur consolidation among the finance industry’s biggest data providers. In November, S&P Global Inc. agreed to buy IHS Markit Ltd. for about $39 billion. That same month, LSE’s biggest European rival, Deutsche Boerse AG, bought a majority stake in Institutional Shareholder Services Inc., the corporate-governance adviser.

The Refinitiv deal has drawn plenty of scrutiny.

Regulators flagged potential issues with the combined company’s market share in European government bond trading, trading and clearing of interest-rate derivatives, real-time data feeds and index licensing -- citing the possibility that LSE’s historic rivals could be shut out from accessing Refinitiv’s important information.

EU Competition Commissioner Margrethe Vestager had also expressed concerns about how some companies amass data.

Completion of the deal would mark a departure from a series of failed transactions involving major stock exchanges. In 2017, a tentative plan to combine LSE and Deutsche Boerse aimed to create a European champion that could compete with the biggest U.S. exchanges. It was ultimately vetoed by European regulators for diminishing competition.

(Updates with LSE comment, background, starting in fifth paragraph)